Sharkey PILOT recipe not on Malloy's menu

The Democratic speaker of the state House of Representatives introduces a major tax bill that he says has tremendous momentum behind it. The Democratc governor opines that the bill is not going anywhere this session.

So what should we make of this?

House Speaker J. Brendan Sharkey's bill, if enacted, would assess a property tax on nonprofit hospitals and universities. Sharkey makes the case that these institutions no longer act like nonprofits, but big corporations. They benefit from city services, but don't pay for them. They should, he argues.

It is a controversial move and fundamental shift in tax policy. When the speaker visited with our editorial board March 19, we asked him if he really expected to get such a contentious bill through the legislature this year. Alternatively, was he setting the stage for potential enactment of this and other reforms after the November election?

"My inclination is there is no reason not to continue pushing," the speaker told us.

He didn't move off that position Wednesday when questioned by a reporter, saying he still expected the House to vote on it later this session.

Also on Wednesday, one week after Sharkey met with the editorial board, it hosted a visit from Gov. Dannel P. Malloy. He continued to avoid taking a position on Sharkey's proposal, making it clear he didn't think he would have to.

"I don't see it going anywhere this year, quite frankly," said the governor; in fact, he said it twice.

"We need to have an honest discussion (about tax reform)," he repeated later in the interview. "It's just not going to take place this year."

So there you have it. Two powerful Democrats, who you would think might try to get on the same page on something as important as rewriting property tax laws, seem to be operating in alternative realities.

My theory is Sharkey thought he was sending up a trial balloon that the legislature could revisit next session. He had heard complaints from elected leaders in Hamden - part of his district and home to Quinnipiac University - that the university keeps expanding and taking more property off the tax rolls.

His solution was proposing to tax Quinnipiac and every other nonprofit university and hospital in the state. Not fully tax them, mind you. His proposal was the "reverse PILOT," which stands for Payment in Lieu of Taxes. The state sends revenue to municipalities to make up for the money they lose because the nonprofits are untaxable. However, PILOT covers only about one-third of the lost revenues.

Under Sharkey's reverse plan, that PILOT money would go instead to the hospitals and universities, covering one-third of the cost of the new tax payments they would be making to the municipalities. That is a big gain for the towns and cities, a big hit for the nonprofits.

"So I put it out there, not necessarily expecting," Sharkey told us, not finishing his thought, then continuing, "to put it out there as an idea that we might want to consider."

Translation: I don't think the speaker expected the proposal to catch fire, but it did.

"Immediately, I mean, instantaneously, I got support from folks all over, many of who are families and taxpayers in communities who are fed up. And from mayors and first selectpeople ... and calls from people on the other side of the aisle who expressed support for it," the speaker explained to us. "I really started to engender a lot of momentum."

The governor, it appears, wishes he had not. With his statements this week, Malloy makes it clear he does not want this bill to reach his desk. It might have something to do with facing re-election in November (though he has not officially announced).

If he were to sign such a bill, Malloy could expect to confront 30-second attack ads saying his appetite for spending had grown so insatiable that he was now signing bills to tax nonprofit institutions, like hospitals, for goodness sake.

Then there would be the specter of hospital layoffs and university tuition hikes, with the institutions blaming Malloy's signing of the reverse PILOT law.

Conversely, if he were to veto the bill, he would be snatching tax relief from desperate cities across the state, cities where he needs to run very strong to win re-election.

No wonder the governor would just as soon the bill doesn't go anywhere this year.

And if the governor, the unofficial head of the party, facing a tough re-election, does not want it to go anywhere, I suspect it won't, regardless of how much momentum the speaker may have engendered.